Newcrest sees golden age in Lihir union

Newcrest Mining
chief executive
Ian Smith
will tour all of the newly expanded goldminer’s operations before making a decision about whether any will be offered for sale.

Melbourne’s Newcrest assumed day-to-day control of Lihir Gold yesterday after receiving Papua New Guinea court approval for its $9.5 billion takeover last week.

Marking the occasion, Mr Smith said that starting next week, he would visit 10 mines in four countries, gathering information that will be used to formulate a five-year plan.

“We think we’ve got some properties with some great exploration upside," he said. “So it’s not just a case of their existing size, it’s what their capacity is over time."

Newcrest expects to have provided investors with a detailed five-year production outlook by the time it announces its financial year 2011 results next August.

Analysts anticipate that the portfolio review required for the long-range forecast could result in one or more assets being put up for sale.

Based on their size, its assets in Queensland – the Mt Rawdon mine in Queensland and a 70 per cent interest in the Cracow mine – have been tipped as prime candidates. Some analysts have also suggested it might make sense for Newcrest to sell the Bonikro mine in Cote D’Ivoire and keep its focus on the Asia-Pacific region.

However, Mr Smith indicated yesterday that Cote D’Ivoire, and Africa in general, would feature prominently in the company’s plans.

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“We’re going to get our exploration teams in there as soon as we can to do a full assessment of what is the potential of that area," he said.

Any proceeds from asset sales will provide an additional boost to Newcrest’s balance sheet, which should remain in excellent condition once the Lihir transaction closes.

Assuming the final cash component Newcrest pays to Lihir shareholders is about $500 million, the combined group’s gearing is expected to be between zero and 5 per cent.

Mr Smith said the company would be comfortable with gearing of between 15 and 25 per cent, sufficient to maintain a BBB+ credit ­rating. However, he said he would allow it to go higher in exceptional circumstances.

“If something came along that was a compelling acquisition or there was some other reason to go to a higher gearing point over a short period, we’d certainly pursue it," he said.